Lucapa Diamond Company Limited (ASX:LOM) has not performed well recently and CEO Stephen Wetherall will probably need to up their game. Shareholders can take the chance to hold the board and management accountable for the unsatisfactory performance at the next AGM on 25 May 2021. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

Check out our latest analysis for Lucapa Diamond

Comparing Lucapa Diamond Company Limited's CEO Compensation With the industry

Our data indicates that Lucapa Diamond Company Limited has a market capitalization of AU$47m, and total annual CEO compensation was reported as US$318k for the year to December 2020. Notably, that's a decrease of 30% over the year before. We note that the salary portion, which stands at US$304.1k constitutes the majority of total compensation received by the CEO.

For comparison, other companies in the industry with market capitalizations below AU$258m, reported a median total CEO compensation of US$237k. Accordingly, our analysis reveals that Lucapa Diamond Company Limited pays Stephen Wetherall north of the industry median. Moreover, Stephen Wetherall also holds AU$309k worth of Lucapa Diamond stock directly under their own name.

Speaking on an industry level, nearly 69% of total compensation represents salary, while the remainder of 31% is other remuneration. Lucapa Diamond has gone down a largely traditional route, paying Stephen Wetherall a high salary, giving it preference over non-salary benefits. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

Lucapa Diamond Company Limited's Growth

Over the last three years, Lucapa Diamond Company Limited has shrunk its earnings per share by 21% per year. It saw its revenue drop 70% over the last year.

Few shareholders would be pleased to read that EPS have declined. And the fact that revenue is down year on year arguably paints an ugly picture. It's hard to argue the company is firing on all cylinders, so shareholders might be averse to high CEO remuneration. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has Lucapa Diamond Company Limited Been A Good Investment?

The return of -80% over three years would not have pleased Lucapa Diamond Company Limited shareholders. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

To Conclude…

Lucapa Diamond pays its CEO a majority of compensation through a salary. Along with the business performing poorly, shareholders have suffered with poor share price returns on their investments, suggesting that there's little to no chance of them being in favor of a CEO pay raise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

CEO compensation is an important area to keep your eyes on, but we've also need to pay attention to other attributes of the company. In our study, we found 6 warning signs for Lucapa Diamond you should be aware of, and 3 of them are a bit concerning.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies that have HIGH return on equity and low debt.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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